Having seen its Yeezy brand of designer shoes become its single most important revenue stream evaporate, Adidas struck a record-breaking agreement for the right to equip a Premier League side in the hopes of more fully capitalizing on an important existing source of demand: authorized replica jersey sales.
According to the NYSE-listed club, Adidas will pay the Red Devils at least 900 million pounds sterling, or approximately $1.2 billion, to prolong their contract for another 10 years, until June 2035.
“We look forward to continuing our partnership with one of the most iconic clubs in football,” Bjrn Gulden, the new CEO of Adidas, said in a statement issued to Fortune on Monday.
The BBC reports that this is an increase of 20% above the previous 10-year arrangement, which saw Adidas replace Nike as the team’s official clothing supplier.
The United States is currently competing in the FIFA Women’s World Cup and the new partnership will help bring even more attention to United’s women’s team.
The sportswear behemoth, with headquarters in the small German town of Herzogenaurach, said nothing about the deal’s financials.
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Adidas’s attempt for a quick win
After Kanye ‘Ye’ West’s anti-Semitic remarks caused Adidas to cancel their collaboration on a line of athletic shoes, the company is in desperate need of new sources of cash. It is estimated that Yeezy was responsible for almost a tenth of the company’s revenue.
Adidas claims it briefly considered burning down $1.3 billion in unsold stock but ultimately decided to sell the merchandise instead. It claimed it will give back to charity, but gave no details about how much.
As a result of the liquidation, Adidas’ quarterly results saw an immediate boost, and the company revised its year sales projection the previous week to reflect a more moderate decrease in turnover. On August 2nd, a second batch of stock will be made available.
Adidas is taking a calculated risk, but things are looking up for the club, so it may be worth it.
United will compete in the lucrative Champions League next season, and rumors have it that Qatari Sheikh Sheikh Jassim and U.K. chemicals tycoon Jim Ratcliffe are vying to take up the team.
Since the Glazer family, reviled by Red Devil devotees for mismanagement of the once-proud club, announced in November that they would finally put control of United up for sale, shares had nearly doubled.
While Adidas has watched its uniform partnership with rival Manchester United increase in value, Adi Dassler’s estranged brother Rudolf formed Puma across town.
The team, owned by Sheikh Mansour of Abu Dhabi and managed by Pep Guardiola, achieved a historic triple last season, winning the Premier League, the FA Cup, and the Champions League.
FAQs
The deal is worth $1.2 billion (£900 million) over 10 years. This makes it the most valuable kit deal in football history.
The deal is for 10 years, starting from July 1, 2023.
